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2021 (12) TMI 426 - AT - Central ExciseCENVAT Credit - stock transfer - credit of duty paid on inputs received from their sister concern under stock transfer invoices - Rule 7(4) of the Cenvat Credit Rules, 2001/2002 - HELD THAT - Rule 3 of Cenvat Credit Rules which provides for eligibility criteria of Cenvat credit does not discriminate between purchase and procurement. The only pre-condition appears to be receipt of input or capital goods in the factory of manufacture. Karnataka High Court in the case of KARNATAKA SOAPS AND DETERGENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2010 (2) TMI 524 - KARNATAKA HIGH COURT has upheld the view that Rule 7 which is more towards laying down the procedure cannot take precedence over Rule 3. The impugned order does not stand the scrutiny of law - Appeal allowed - decided in favor of appellant.
Issues:
Admissibility of Cenvat credit on inputs received from sister concern under stock transfer invoices - Interpretation of Rule 7(4) of Cenvat Credit Rules, 2001/2002 - Whether inputs were purchased or procured - Pre-requisite for availing Cenvat credit - Tribunal's precedent in Exide Industries Ltd. case - Applicability of Karnataka High Court's decision in Karnataka Soaps & Detergents Ltd. case. Analysis: The case involved the challenge by M/s Brakes India Private Limited against Order-in-Original No. 32/2019-20/Commr/PP/FBD dated 31.01.2020, which proposed to deny Cenvat credit for inputs received from sister concern under stock transfer invoices. The Department alleged that Cenvat credit was inadmissible under Rule 7(4) of the Cenvat Credit Rules, 2001/2002, as the inputs were not purchased but procured. The appellant argued that the inputs were purchased from their sister units, emphasizing that the Central Excise Act defines "sale" and "purchase" broadly, without specifying the value of consideration as determinative. The appellant maintained separate excise registrations for different units and availed input services and inputs for manufacturing. They contended that Rule 3 of Cenvat Credit Rules does not require purchase as a pre-requisite, and Rule 7(4) is procedural, not dealing with credit admissibility. The appellant cited precedents and the Karnataka High Court's decision in Karnataka Soaps & Detergents Ltd. case to support their argument. The Tribunal considered the arguments and precedents cited by the appellant, particularly the case of Exide Industries Ltd. where credit was allowed on inputs received from sister units. The Tribunal noted that Rule 3 of Cenvat Credit Rules does not differentiate between purchase and procurement, requiring only the receipt of inputs in the factory of manufacture. They highlighted the Karnataka High Court's view that Rule 7, focusing on procedure, cannot override Rule 3. The Tribunal quoted the Exide Industries Ltd. case, emphasizing that even after the substitution of "procured" for "purchased" in Rule 7(4) of Cenvat Credit Rules, the term "purchase" is not essential for claiming Cenvat credit. They concluded that the impugned order did not withstand legal scrutiny and needed to be set aside. In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law. The judgment emphasized the eligibility criteria under Rule 3 of Cenvat Credit Rules, the procedural nature of Rule 7, and the precedents supporting the appellant's position regarding the admissibility of Cenvat credit on inputs received from sister units under stock transfer invoices.
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